Thursday, May 11, 2006

Funding Robotic Freedom

In the May 15 issue of Time Magazine, columnist Joe Klein takes an interesting stance. The article is called A Fair Trade for Lower Gas Prices and his suggestion is simple: raise the gasoline tax to discourage consumption, and then give the money collected back to people:

Gasoline at $4 per gal. might get the job done, but that could have a very disruptive effect on the economy. How to minimize the disruption? By sending every last penny raised through new energy taxes right back to the public.

His idea for giving the money back, however, is convoluted.

The simple way to give the money back is through a central account that distributes money to all citizens, an idea first proposed in the article Robotic Freedom. If Klien's tax were distributed through the central account proposed in Robotic Freedom, it would be a great way to get the program started.

Americans consume something like 150 billion gallons of gasoline per year. So a tax of $1 per gallon would yield about $150 billion for distribution. $2 per gallon would yield $300 billion for distribution. The tax could be phased in over a 2 year period to minimize impact. The great thing is that people would be getting the money right back through the central account, so the net effect on the economy would be zero.

See Robotic Freedom for details on the central account, and a dozen other ways to provide additional funding for it.

It is ridiculous to say that it will have no effect on the economy. Why propose it in that case? MB, what you should be saying is that it operates solely as a redistributive tax on those who consume more gasoline than average. It will probably be quite progressive (i.e. those who consume more gasoline than average tend to have higher incomes than average). Predictably, it will lead to lower average consumption of fuel. It will probably also have some unintended (and unanticipated) effects, too. For example, the cost of all goods for which transportation is an input will increase. This could lead to higher inflation. So if you like high spenders transferring wealth to low spenders and inflation, then this is a great proposal. Having said all this, it is a nice retort to those who are now calling for lower gasoline taxes...